The agreement would give investors 0.11 Tesla shares for every Solar City share they own.

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On Monday morning, Tesla announced that it has come to an agreement with SolarCity. Tesla will buy the company in an all-stock deal that would give 0.11 shares of Tesla stock to investors for every share of SolarCity stock they own. The Wall Street Journal estimates this would make the deal worth $2.6 billion.

On a phone conference early this morning, Tesla CEO Elon Musk—who is also a chairman on SolarCity’s board and who is cousins with the SolarCity CEO, Lyndon Rive—said the deal would create a “stronger balance sheet” for both companies and allow the two businesses to build an integrated product that combines electric vehicle charging, solar power, energy storage, and installation and servicing of the whole system.

In a press release from Tesla, the company said that a merger could generate $150 million in “cost synergies” in the first full year after the deal closes. Executives from both Tesla and SolarCity said those synergies would come from decreased marketing expenses and the ability to leverage Tesla’s retail footprint by selling SolarCity panels in Tesla stores, as well as reducing the cost to service customers by consolidating service visits.

Per the terms of the agreement, SolarCity now has 45 days to shop for a better offer before the two companies formally present their merger intentions to shareholders and the Securities and Exchange Commission (SEC). Musk noted that he had been recused from the financial calculations that determined the amount of stock Tesla paid for SolarCity, and he noted that the solar company would be obligated to accept the best deal for its shareholders even if that deal wasn’t with Tesla. “If [the deal] doesn’t go through it will be a bit awkward,” Musk admitted. He added that despite media reports of a conflict of interest due to Musk’s ties to SolarCity, it would be “a conflict of interest if we don’t merge” and try to build an integrated solar energy and storage project as two separate companies.

“it’s very limited what we can do until we’re one company,” Musk said.

Tesla and SolarCity executives expect the deal to close in Q4 2016.

On the call, Musk and Tesla CTO J.B. Straubel said that Tesla’s manufacturing experience would be a boon to SolarCity shareholders accepting the deal. The solar panel company is in the process of building its own $750 million solar panel factory in Buffalo, NY, which should be completed next year. Many have compared it to the Gigafactory, Tesla’s sprawling new battery factory in Sparks, NV. That building is being built in partnership with Panasonic and could deliver up to 150 gigawatt hours of battery storage per year by 2020, according to a statement made by Musk last week.

“Tesla at this point has become quite good at manufacturing… obviously we need to show that we can do this but I believe that it’s possible to make substantial improvements to manufacturing,” Musk said on today’s call. Those improvements could result in “a half order of magnitude improvement over the next best factory in the world.”

The CEO also called back to a statement he made at the Gigafactory last week. Through a number of unspecified improvements, he believes the factory will be able to churn out three times as much storage and only hire twice as many people. Musk said that greater automation at the Gigafactory and at Tesla’s auto manufacturing plants could contribute to the company's efficiency goals, but he noted that Tesla’s employees will need “a higher training level.” That could require Tesla “to establish schools and training because a lot of the work is going to be more sophisticated,” he said. “I think the quality of work will be a lot more interesting.”

Straubel jumped in to add that Tesla has already been working with community colleges and technical schools near Tesla’s factories.

This manufacturing experience, the executives say, will transfer to SolarCity if the deal gets approved. Musk said that one goal is to improve the design of the integrated solar panel and storage system that the two companies plan on pushing out. “It needs to be so good that when you get [the solar panels], you call your neighbors over to look at them because you’re so proud of them,” he said.

Finally, Musk said that a merger with SolarCity wouldn’t necessarily be a shot off the bow of utilities. On the contrary, the Tesla CEO said that the company would work “in hand” with utilities to transition to a sustainable situation. “As transport becomes electric, as heating becomes electric, the demand for electricity is going to increase,” Musk said. In such a scenario, he believes utilities could meet that increased demand without building new substations by leveraging the solar on peoples’ homes. This, Musk said, would result in "beautiful localized rooftop generation paired with centralized generation."